Downfall of the Caliphate: Daesh's Revenues Plummet Amid Battlefield Losses

Daesh might be the richest terrorist organization in the world, but its business model is hardly sustainable since the group's revenue is closely dependent on the area under its control and the number of people living in its self-proclaimed caliphate. In other words, battlefield losses lead to territorial losses which mean shrinking revenues.

At a time when dozens of countries combined into two major coalitions, with one led by Russia and the other one by the United States, are engaged in large-scale anti-Daesh operations across Iraq and Syria, Daesh's financial future looks shaky. Statistics seems to confirm this.

Last week, the International Centre for the Study of Radicalization and Political Violence (ICSR) released a report on Daesh finances. Although it is hard to determine how much the group has earned since it became a household name in mid-2014, estimates suggest that the organization's revenues have dropped sharply.

"In the years since 2014, [Daesh's] annual revenue has more than halved: from up to $1.9b in 2014 to a maximum of $870m in 2016. There are no signs yet that the group has created significant new funding streams that would make up for recent losses. With current trends continuing, the [Daesh's] 'business model' will soon fail," the analysts said.

Daesh's shrinking revenues come as no surprise since the group's income, mainly generated through taxes, fees, fines, oil smuggling, looting and confiscations, is closely linked to the territory it controls. This business model once helped the organization obtain hundreds of millions, but has been working against the militants since they are losing ground in both Iraq and Syria.

According to the latest estimates provided by IHS Markit, Daesh lost 15 percent of its territory in 2015 and 23 percent in 2016. The terrorist organization is also expected to lose the Iraqi city of Mosul, one of its main strongholds. IHS Markit suggested that Iraqi security forces assisted by the US-led coalition, Kurdish fighters and the Popular Mobilization Units could retake the second largest city in the country before July.

ICSR warned that the decline in revenues does not necessarily mean that Daesh will cease to exist. The group has "repeatedly demonstrated that financial and military setbacks can be overcome". Financial troubles and battlefield losses have also not prevented the brutal organization from carrying out terrorist attacks in the Middle East and beyond.

In an article for Sputnik, political analyst Gevorg Mirzayan observed that it would be premature to talk about Daesh's demise at the moment since the group has "enough resources to fight in Iraq and Syria for months, if not years."

Mirzayan further said that the group does not need to earn much to carry out terrorist acts in the West.

"High-profile attacks in Paris cost several thousand euros, not millions. The budget of the assault in Nice was even lower. This is why even if Daesh is destroyed in Iraq and Syria, it will transform itself into a network-based organization which will continue to present a threat to the West. The victory over Daesh could be achieved by targeting ideology rather than finances and territory," he suggested.

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